2014 Energy & Commodities Conference

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Cadwalader, Wickersham & Taft LLP www.cadwalader.com

October 8, 2014

2014 Energy & Commodities

Conference

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Electric Market Update:

FERC and CFE

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Cadwalader, Wickersham & Taft LLP 3

Panelists

• Moderators: Ken Irvin and Terence Healey, Cadwalader

• Jette Gebhart, Senior Policy Advisor to FERC Chair

Cheryl LaFleur, FERC

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Introducing Jette Gebhart, Senior

Policy Advisor to Chairman Cheryl

LaFleur

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Cove Point LNG Export Authorization

• Fourth LNG Export Approval Granted by FERC.

• Permits export from Cove Point terminal in Maryland of

up to 5.75 metric tons of LNG/year.

• Targeted completion of Maryland Liquefaction facilities:

June 2017.

• Construction of related Virginia facilities targeted to

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Contention Over Cove Point

• During 2-year approval process,

FERC heard from 140 speakers at 3 public meetings related to

Environmental Assessment.

• Received > 650 comments from

the public and federal and state local agencies on the application.

• July 14, 2014 protesters hauled off

in handcuffs.

• Balance of Environmental and

Economic.

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Evolving Capacity Markets

• “LaFleur said capacity markets also

need to evolve and suggested that need has become more apparent given the changes occurring in the power industry, including in the

generation resource mix in response to the growth of natural gas and

renewable generation, new

environmental regulations and other factors.”

• Boshart, Glen, FERC’s LaFleur details possible need for capacity markets, enforcement process to evolve

(SNL, Aug. 12, 2014) (paraphrasing Chairman LaFleur)

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New England Capacity Markets

• “The ISO-New England (ISO-NE) Forward Capacity Market

(FCM) plays a vital role in ensuring reliability in New

England. The FCM auction (the Forward Capacity Auction or FCA) is the mechanism that ensures future system reliability by procuring capacity resources sufficient to meet New

England’s resource adequacy needs. . . . This is especially important in light of the current capacity situation in New England, where for the first time the region is facing an overall capacity shortage and the FCM must procure new resources in order to satisfy New England’s reliability

needs.”

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Coordination Between Gas and

Electric

• “Questions related to gas/electric interdependency

highlight one of the central issues we face as federal

regulators—whether to encourage regional solutions, or act to promote national solutions. We learned in the

comments and in the technical conferences that certain gas/electric issues varied sharply by region, while

others were more national. Thus, both regional and national actions are called for.”

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Heavy Investment in Natural Gas

• “Half of power plant capacity additions in 2013 came from natural gas,” U.S. Energy Information

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Changes to Enforcement Policy?

• “LaFleur said she is open to considering possible

reforms to the agency's enforcement processes. . . .”

• “LaFleur also acknowledged that enforcement is a

relatively new area of FERC's work. As such, ‘a lot of things are cases of first impression, things are

happening for the first time, and it's normal that there would be debate about it.’”

• Boshart, Glen, FERC’s LaFleur details possible need for capacity markets,

enforcement process to evolve (SNL, Aug. 12, 2014) (paraphrasing Chairman

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CFE’s Natural Gas Transportation Strategy

& the Energy Reform

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T a b l e o f C o n t e n t s

1. Mexico’s Energy Reform and the CFE

2. Mexico’s Natural Gas Transportation System (Plan 2028)

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The new law forces the monopoly to reorganize itself horizontally and not vertically. Private firms will be able to participate in the power

generation strengthening the competitiveness of the market.

An independent power system operator is created (CENACE) and placed outside of CFE.

An independent natural gas pipeline system operator is created (CENAGAS) and placed outside of CFE.

A new power and fuel market will flourish upon the mid-term.

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All natural gas projects of CFE are designed as long-term transportation projects:

• To expand and reinforce Mexico’s natural gas pipeline network utilized for generation of electric power and industrial usage.

• To improve Mexico’s natural gas supply chain.

• To offer all Mexican end users a wider range of opportunities to

meet their natural gas consumption needs at competitive prices.

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2. Mexico’s Natural Gas Transportation System (Plan 2028) In construction Sásabe Puerto Libertad Topolobampo Mazatlán El Encino Tlaxcala Cuautla Aguadulce Reynosa Nueces Guaymas In construction

Pemex National Pipeline System (±6,751 mi.)

LNG Terminals Compression Stations

Pipeline Diameter _(MMCFD)Capacity Distance_{( ± mi. )}

Sásabe - Guaymas 36” 770 322 Guaymas – El Oro 30” 510 215 El Oro - Mazatlán 24” 202 273 El Encino - Topolobampo 30” 670 340 Tlaxcala - Cuautla 24” 320 102 Aguadulce - Reynosa 42” 1,330 118 TOTAL: 1,370

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La Laguna El Encino San Elizario/ San Isidro Presidio / Ojinaga Escobedo Colombia Waha LNG Terminals Compression Stations

Pipeline Diameter _(MMCFD)Capacity Distance_{( ± mi. )}

Waha – San Elizario 42” 1,475 178

San Isidro - Samalayuca 42”/30” 1,450/600 14

Samalayuca - Sásabe 30” 550 330 Waha - Presidio 42” 1,350 136 Ojinaga – El Encino 42” 1,350 150 El Encino – La Laguna 42” 1,500 250 Colombia - Escobedo 42” 1,500 150 TOTAL: 1,208 Samalayuca Sásabe Announcements CFE

Pemex National Pipeline System (±6,751 mi.)

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In operation CFE pipelines In construction

Announcement 2014

Pemex National Pipeline System

LNG Terminals Compression Stations Sásabe Puerto Libertad Topolobampo Mazatlán Manzanillo Guadalajara La Laguna El Encino Tamazunchale El Sauz Naranjos Tlaxcala Cuautla Escobedo Colombia Aguadulce Reynosa Nueces Aguaprieta Naco Waha Guaymas San Elizario/ San Isidro Presidio / Ojinaga Samalayuca

Pipeline System shift by 2028 Distance_{( ± mi. )}

PEMEX (actual) 6,751

Additional to existing system 6,805

TOTAL: 13,556

Distances include not only announcements due 2014 but also future announcements by 2018

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Conversion of Thermal Power Plants

Conversions according to CFE’s strategy

Aguaprieta Samalayuca Sásabe Puerto Libertad Guaymas Topolobampo Mazatlán Manzanillo Guadalajara La Laguna Tamazunchale El Sauz Naranjos Tlaxcala Cuautla Escobedo Colombia Aguadulce Reynosa Nueces Naco Waha El Encino Francisco Villa Mazatlàn II Topolobampo II Manzanillo II Presidio / Ojinaga San Elizario/ San Isidro Villa de Reyes Río Bravo Tula Puerto Libertad Power Plants

for Conversion (MW)Cap. Est. COD

Puerto Libertad 632 Apr 2015

Río Bravo 300 Apr 2015

Tula 1,606 Oct 2015

Villa de Reyes 700 Dic 2015

Mazatlán II 300 Feb 2016

Topolobampo II 320 Apr 2016

Francisco Villa 300 Apr 2016

Manzanillo II 700 Nov 2016

TOTAL Repowered MW: 4,858

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New Combined Cycle Power Plants Aguaprieta Samalayuca Sásabe Puerto Libertad Guaymas Topolobampo Mazatlán Manzanillo Guadalajara La Laguna Tamazunchale El Sauz Naranjos Tlaxcala Cuautla Escobedo Colombia Aguadulce Reynosa Nueces Naco Waha El Encino Aguaprieta II Norte III Norte VI & Norte VII Francisco Villa Lerdo Mazatlàn Noroeste & Topolobampo III Tamazunchale II & Tamazunchale III Guaymas II & Guaymas III Noreste & Monterrey IV Guadalajara I Presidio / Ojinaga San Elizario/ San Isidro

New Power Plants

Non Central México (MW)Cap. COD

Norte III 954 Jul 2017

Guaymas II 735 Apr 2017

Guaymas III 735 Jul 2017

Baja California II (SLRC) 276 Jul 2017 Noreste (Escobedo) 1,034 Dec 2017 Lerdo (Norte IV) 990 Apr 2018 Noroeste (Topolobampo II) 847 Apr 2018

Topolobampo III 700 May 2018

Guadalajara I 908 Apr 2019

San Luis Potosí 862 Apr 2019

Mazatlán 867 Apr 2020

Baja California V (SLRC) 522 Apr 2020

Aguascalientes 872 Apr 2020

Francisco Villa (Norte V) 958 Apr 2021

Monterrey IV 1,088 Apr 2022

Salamanca 680 Apr 2022

Salamanca II 680 Apr 2023

Chihuahua Sur (Norte VI) 958 Apr 2024 San Luis Potosí II 862 Jun 2024 Tamazunchale II 1,121 Jul 2025 Tamazunchale III 1,121 Apr 2026 Aguascalientes II 872 Jul 2027

Norte VII 867 Jun 2028

TOTAL MW: 19,509

New Power Plants at Baja California & Yucatán Clusters and Repowering are not included

Baja California II & BajaCalifornia V

San Luis Potosí & San Luis Potosí II Aguascalientes

Salamanca & Salamanca II

New Power Plants

Central México (MW)Cap. COD

Valle de México II 601 May 2017 Centro II 660 Sep 2019 Central (Tula) 1,162 Apr 2021 Valle de México III 601 Apr 2023 Central II (Tula) 1,162 Apr 2024

TOTAL MW: 4,186 TOTAL Additional CC MW: 23,695

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3. Pipeline Biddings in the U.S. (Waha, TX.)

As a result of the Energy Reform, and the competitiveness that the

market will require for power generation, CFE requires natural gas

transportation systems with reliable and diversified sources of supply.

Today, Mexico’s natural gas supply is concentrated in the

Northeastern-Gulf side of the country, which brings limited flexibility and supply options.

The development of alternate routes along the border between the U.S. and Mexico will strengthen market capabilities and will help to improve operational margins.

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22 C.O.D. : January 2017

Diameter: 42” Capacity (MMCFD): 1,475

Length (approx) : 225 Miles MAOP (psig): 1,440

Waha – San Elizario (November 2014)

• Development, construction and operation of a Header“CFE Waha Header” for 2.825 Bcf/d, with at least 10 interconnects to existing pipelines near the Waha Hub area that supply at least 130% of the maximum aggregated capacity of these pipelines (130%*2.825 Bcf/d).

• Development, construction and operation of a pipeline with capacity of 1.475 Bcf/d from CFE Waha Header to United States Border with Mexico near San Elizario, Texas.

• Border crossing and permits to interconnect with a future pipeline that runs from San Isidro to Samalayuca, both located in the State of Chihuahua, Mexico. • Minimum pressure of delivery at the international border at 1,145 psig.

• 25-year Transportation Service Agreement (“TSA”). At the end of the agreement, CFE and the Transporter will enter into a Joint Venture

agreement andCFEshall own49% of the equity.

Fiber optic lines that will service the telecommunication needs of the pipeline, which will run parallel to it. Design, development, construction and operation of the Fiber Optic Lines must be included in the tariff of the TSA.

RFP final stage schedule Due

Submission of final proposals (Houston, Texas, exact location TBD) November 14, 2014

Announcement of winning bidder (Houston, Texas, exact location TBD)

December 5, 2014

Execution of TSA (Mexico City, Mexico, exact location TBD) January 16, 2015

(All dates and requirements may change subject to the final specifications of the corresponding RFP.)

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Waha – Presidio (November 2014)

C.O.D. : March 2017 Diameter: 42”

Capacity (MMCFD): 1,350 Length (approx) : 145 Miles

MAOP (psig): 1,440

• Development, construction and operation of a pipeline with capacity of 1.350

Bcf/d from CFE Waha Header to United States Border with Mexico near Presidio, Texas.

• Border crossing and permits to interconnect with a future pipeline that runs from Ojinaga to El Encino both located in the State of Chihuahua, Mexico.

• Minimum pressure of delivery at the international border at 1,160 psig.

• 25-year TSA. At the end of the agreement, CFE and the Transporter will enter into aJoint Ventureagreement andCFEshall own49% of the equity.

• Fiber optic lines that will service the telecommunication needs of the pipeline, which will run parallel to it. Design, development, construction and operation of the Fiber Optic Lines must be included in the tariff of the TSA.

RFP final stage schedule Due

Submission of final proposals (Houston, Texas, exact location TBD) November 14, 2014

Announcement of winning bidder (Houston, Texas, exact location TBD)

December 5, 2014

Execution of TSA (Mexico City, Mexico, exact location TBD) January 16, 2015

(All dates and requirements may change subject to the final specifications of the corresponding RFP.)

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• Commitment Bond and Performance

• Specific experience criteria to be met by the Bidders on development, construction, operation, permitting, routing (ROW’s) and financing for similar natural gas transportation projects in the US

• Governing Law: State of Texas • Language: English

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